TOP-UP YOUR SUPER WITH HELP FROM THE GOVERNMENT

If your income is under a certain threshold, then making personal after-tax super contributions could enable you to qualify for a Government co-contribution and take advantage of the low tax rate payable in super on investment earnings.

HOW DOES THE STRATEGY WORK?

If you earn less than $51,813 pa (of which at least 10% is from eligible employment or carrying on a business) and you make personal after-tax super contributions, the Government may also contribute into your super account. This additional super contribution, which is known as a co-contribution, could make a significant difference to the value of your retirement savings over time. To qualify for a co-contribution, you will need to meet a range of conditions, but as a general rule:

  • The maximum co-contribution of $500 is available if you contribute $1,000 and earn $36,813 or less
  • A reduced amount may be received if you contribute less than $1,000 and/or earn between $36,814 and $51,812, and
  • You will not be eligible for a co-contribution if you earn $51,813 or more.

The Australian Taxation Office (ATO) will determine whether you qualify based on the data received from your super fund (usually by 31 October each year for the preceding financial year) and the information contained in your tax return.  As a result, there can be a time lag between when you make your personal after-tax super contribution and when the Government pays contribution and when the Government pays the co-contribution. If you’re eligible for the co-contribution, you can nominate which fund you would like to receive the payment. Alternatively, if you don’t make a nomination and you have more than one account, the ATO will pay the money into one of your funds based on set criteria.

Note: Some funds or superannuation interests may not be able to receive co-contributions. This includes unfunded public sector schemes, defined benefit interests, traditional policies (such as endowment or whole of life) and insurance only superannuation interests.

OTHER KEY CONSIDERATIONS

  • You can’t access super until you meet a ‘condition of release’. For more information, please visit the ATO website at

    www.ato.gov.au

  • You may want to consider other ways to contribute to super, such as salary sacrifice or personal deductible contributions.

CASE STUDY

Ryan, aged 40, is employed and earns $35,000 pa. He wants to build his retirement savings and can afford to invest $1,000 a year. After speaking to a financial adviser, he decides to use the $1,000 to make a personal after-tax super contribution. By using this strategy, he’ll qualify for a co-contribution of $500 and the investment earnings will be taxed at a maximum rate of 15%. Conversely, if he invests the money outside super each year (in a managed fund, for example), he will not qualify for a co-contribution and the earnings will be taxable at his marginal rate of 21%²

CHAT TO A FINANCIAL ADVISER

A financial adviser can help you determine whether you should make personal super contributions and assess whether you will qualify for a Government co-contribution

*General Advice Warning: This advice may not be suitable for you because it contains general advice that has not been tailored to your personal circumstances. Please seek financial advice prior to acting on this information.

Nicole O'Sullivan

Office Manager - Ambleside Wealth Advisers

I’d like to think that having to share one bathroom amongst my four siblings and taking it in turns to ‘get the cows up to the dairy’ for Dad gave me some early insights into what it takes to work alongside others. Over the years, I have learnt that the most important ingredient required to create a successful team is to be supportive.
So, to put it plain and simple, I really like to help. I like helping my team out wherever they need assistance and I like finding new, innovative ways to increase our office efficiencies, so the team can achieve that work, life and balance we all strive for. I also like utilising social media platforms to help spread the benefits of good advice. I aim to continue to support not only my work colleagues but the local community so that little stresses in their lives can be a thing of the past.

Ambleside Wealth Advisers

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